In 2016, Pioneer Natural Resources (PXD) founder Scott Sheffield retired. Shares of the company he'd created had plunged from about $280 per share in mid-2014 to around $110 by mid-2016. It was quite a drop and quite a blow to perhaps one of the most prolific Texas oilmen in history.
It came after a time of immense promise - one that ultimately turned into disappointment.
See, back in 2014, U.S. oil prices surged above $100. The dramatic uptick in the commodity price fueled an incredible boom around the United States. Oil companies unleashed hydraulic fracturing technology - fracking - which could pull untapped fuel from formations once untouchable.
But that oil rush quickly turned into an oil bust.
Overexpansion of production crushed shareholders in shale stocks, just like PXD.
After three years in retirement - Sheffield returned to Pioneer. And with him, he brought a new philosophy to the shale oil industry. No longer was it focused on boosting production. Instead, it centered on boosting shareholder value and improving capital discipline.
Pioneer bought back shares. It boosted its dividend. It paid down debt. Pioneer became the largest operator in the oil-rich Permian basin but, critically, didn't overdo it. The company has navigated wild swings in oil prices over the last three years. And since early 2021, the stock has jumped from about $120 per share to $215.
This model has since become the standard of the entire oil industry in the United States, especially when politicians remain hostile to our oil-and-gas production and the Americans who work on those rigs.
In this environment, Sheffield is retiring again... and that could help spark a land rush across the Permian.
Let me explain.
The Rush Starts With Sheffield's Exit
Exxon Mobil Corp. (XOM) is currently exploring a deal to buy Pioneer as Sheffield departs the company. That leaves the company's chief operating officer, Richard Dealey (who was also the former chief financial officer), in charge of the company. This move suggests a deal will get done. Dealey knows the operational efficiency of every rig, understands how that might fit into the plans of a company like Exxon, and also knows every part of the balance sheet and associated costs.
The new CEO has already said that any deal or offer will be a high bar.
He's starting from a position of strength. The company could just keep doing what it's doing. Churning out cash, producing at very low costs, and maintaining shareholder discipline. But something tells me that Exxon could use a leader in their "Permian operations" - someone who can synergize the would-be doubling of the company's output.
Last night, during my live event (you can catch a replay right here - highly recommended) I explained the importance of this deal. It forces the hand of other big oil companies like Chevron Corp. (CVX), and ConocoPhillips Co. (COP) to pick up activity across the markets.
So, who are the targets? It's pretty obvious. Those will be publicly traded oil and gas producers with market caps of less than $10 billion. But one needs to really dig deeper to understand which ones have the highest probability.
The answer to me is obvious. It's the ones that have copied the model of Pioneer. The companies that are already focusing on shareholder value (they have strong Piotroski F- Scores and low debt), engage in capital efficiency. Their valuations are quite low (low book or low buyout value).
Last night, I unveiled the five Permian stocks ripe for acquisition. These are already value stocks that can provide significant upside to your portfolio. In addition, there are incredible options plays we'll be discussing further during live sessions at FlashPoint Trader. You can rewatch our replay, right here.
Today's Momentum Reading
WORLD'S BIGGEST INDICATORS
Recap: The World's Biggest Indicator (Momentum) is Red... Nothing has changed.
But obviously, I'm not expecting much action on the big indexes right now. As I just said, the biggest profit potential in the market is in the Permian Basin - the oil patch. Again, you can catch the replay of my live event, including five compelling takeover targets, right here.
What You Missed
In a nutshell, this remarkable strategy allows Kenny to trade as if he's operating in his very own bull market that consistently rises in value.
Over the past year, Kenny has been using this method to achieve extraordinary, once-in-a-blue-moon gains, such as:
- A 585% increase in just 5 hours on KMB
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Thanks to his Private Bull Market Strategy, Kenny can confidently overlook external factors like the Fed's rate hikes, the demise of companies like BBBY, record inflation, and soaring gas prices. In Kenny's private market, these issues are irrelevant.
This coming Sunday, you'll have the opportunity to understand why.
Don't miss out on this eye-opening exposé. Add it to your calendar below, and stay tuned for more details.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.